Russia Seeks Significant Amount in Damages from Euroclear Regarding Seized Funds

The Russian central bank has stated it is seeking compensation totaling $230 billion from the securities depository Euroclear. This action is a clear warning by the Kremlin regarding proposals to utilize frozen Russian sovereign assets to support Ukraine.

The Substantial Demand

Based on reports in Russian state media, the central bank initiated a claim last week for an estimated 18 trillion roubles. This amount is equivalent to the stated $230 billion claim.

European Union officials will determine later this week regarding a plan to leverage around €210 billion in immobilized Russian state funds. The proposal involves providing Ukraine with a large loan to finance its defence and financial stability.

Most of these assets, amounting to €185 billion, reside at the Euroclear depository in Brussels. This institution serves as the primary custodian for the Russian immobilised financial reserves.

Divergent Legal Views

EU authorities have argued that their plan is legally sound. Their position rests on the fact that ownership of the state assets remains with Russia, even though it was frozen in EU countries shortly after the full-scale military offensive of Ukraine.

Moscow, however, has called any utilization of the assets as theft. Authorities have warned of reciprocal measures, including confiscating European private investors' assets within Russia.

The head of Russia's sovereign wealth fund, a figure who has taken on a key role in diplomatic talks, stated on X that Russia "will prevail in court" and retrieve its funds. He added that the EU, the euro, and Euroclear "will suffer" from the proposal.

Wider Implications

With statements interpreted as an effort to create division between Europe and the United States, Dmitriev described the proposal as "a vicious assault on the right to ownership and the international reserves system created by the United States."

Euroclear refused to comment on the new lawsuit. The institution has previously noted it is facing more than 100 legal cases in Russian courts.

Legal Hurdles Ahead

While courts in European nations are not expected to enforce rulings from Russian tribunals, experts anticipate Moscow to pursue enforcement in nations with stronger ties to the Kremlin.

"The Bank of Russia could try to enforce a Russian court's decision against Euroclear in jurisdictions like China, Hong Kong, the UAE, Kazakhstan, and other friendly states, provided that such assets can be identified," stated a legal expert from an international firm.

EU Countermeasures

European authorities indicated they are developing steps to deter other countries from aiding any Russian lawsuits against EU entities. Additionally, they are designing safeguards to shield EU countries with investments in Russia from what they call "unlawful expropriation."

How the Funding Would Work

According to the complex plan, the EU would provide an first €90 billion loan to Ukraine, using the proceeds earned from the immobilized assets at Euroclear. Critically, Russia's legal claim on the underlying funds would remain unaffected.

Kyiv would only be obligated to return the loan in the event that Russia consented to pay reparations for the vast damage caused during the ongoing war.

Alternative Proposals

Belgium, supported by Italy, Bulgaria, and Malta, has asked the EU to consider an different method for funding Ukraine. This entails joint EU debt issuance to fund a loan, using unused funds within the EU budget.

This alternative move, nevertheless, demands full agreement among all 27 member states. Hungary's government, viewed as aligned with the Kremlin, has previously signaled its opposition.

Speaking on Monday, the EU foreign policy chief, a senior official, said the reparations loan as "the most credible solution" for supporting Ukraine. "The reparations loan is based on the Russian immobilized funds, meaning it is not drawn from our public funds, which is equally important," she remarked. "Furthermore, it delivers a clear signal that when you do all this destruction to another country, you must pay for the rebuilding."